What are Options?

An Option is a contract between two parties where the taker (buyer) is given the right, but not the obligation, to buy or sell an underlying security at a specified price at a specified time in the future.

Options contracts can be classified as either American or European with respect to their expiry type. An American style Option gives the taker (buyer) the right, but not the obiligation, to buy or sell the underlying security at a specified price anytime before or on the expiry date of the Option contract whilst a European style Option can only be exercised on the expiry date.